The ROI of UX

User Experience (UX) design has gained a lot of press in recent years, but is there any cost justification to focusing on UX? Or is it all just a bunch of touchy-feely, warm-and-fuzzy malarkey?

The answer is actually very simple. Unless you are living on Mars perhaps, it’s easy to see that UX powers a significant return on investment (ROI) for your business. To invest in UX is to invest in your revenue growth.

10X – 100X ROI

“Every dollar invested in ease of use returns $10 to $100.”

This statement is not made by Joe Schmo designer, but from global business juggernaut IBM. The company declares that it’s far more economical to consider user needs early in the design process than to try to solve them later.

Even as early as 1966, IBM’s CEO at the time, T.J. Watson, Jr., wrote, “Good design is good business.” He went on to write, “Since design excellence concerns all areas of the business, you should make certain that all your people are aware of its importance.”

In Robert Pressman’s book Software Engineering: A Practitioner’s Approach, the author further explains the business justification of an early focus on UX: “For every dollar spent to resolve a problem during product design, $10 would be spent on the same problem during development and $100 or more if the problem had to be solved after the product’s release.”

ROI of UX in the Market

Forrester Research found that the difference in customer loyalty between companies in the top quartile of its customer experience (CX) index and the companies in the lowest quartile was significant:

14.4% more customers are willing to purchase another product

15.8% more customers are reluctant to switch brands

16.6% more customers are likely to recommend your product

There are plenty of additional examples of the power of user-centricity and UX. A classic example is the battle between Apple’s iPod and Microsoft’s Zune. They were essentially the same product, but Apple’s clean, simple interface completely trumped the complexity of the Zune. The iPod went on to become an iconic product, revolutionizing an industry (together with the similarly easy-to-use iTunes), while Zune hardware was discontinued within five years from its initial release and has been relegated to mediocre paperweight ever since.

Or look at the ultimate simplicity and ease-of-use of the Dropbox website. Then consider Dropbox’s revenue of $200 million+ generated within five years of its launch. The website and application take an extremely minimalist approach to design, with a load time of 1.81 seconds according to Pingdom’s Website Speed Test and with an 86/100 score on Google Developers’ PageSpeed tool. Good UX translates into real business value.

Even on a micro level, it’s easy to see in conversion optimization tests that conversion rates tend to increase with greater simplicity and ease-of-use of a web page. There are endless examples of these cases.

To calculate the ROI of your own UX implementations, try playing around with this collection of ROI calculators by Human Factors International, the world’s largest UX firm.

The Impact on Stock Performance

In looking at a variety of studies over the years, it appears that a focus on UX positively impacts stock performance. Two UX designers, Geoff Teehan and Jon Lax, developed what they called the “UX Fund” by identifying target companies that valued design, innovation and positive customer experience and then investing $50,000 in such companies. After a year, the fund grew by 39.3%, beating all of the major stock indices.

In 2009, Forrester reported that the stock valuation of companies it defined as CX leaders significantly outperformed what it termed as “CX laggards” and the market as a whole, with cumulative total returns that were 41% better than the S&P 500 Index and 145% better than the laggard portfolio.

Watermark Consulting conducted a similar study and reached the same conclusions, as detailed in its report The 2014 Customer Experience ROI Study. In the study, Watermark found that CX leaders outperformed the broader market, generating a total return 26 points higher than the S&P 500 Index. Laggards posted a negative return on investment, and this during a period when the market overall rose sharply.

UX = ROI

So the next time you are asked whether your company should really be investing in UX, whether it’s really worth it and whether the money would be better spent pretty much anywhere else, give them a business lesson! Remember, UX = ROI.

Tom Shapiro is the CEO of Stratabeat. Tom's thoughts on marketing strategy, branding, web design, and neuromarketing have appeared in Chief Marketer, CMO.com, CNN, Forbes, HubSpot Blog, iMedia Connection, MarketingProfs, MediaPost, among others. Tom is the author of the book Rethink Your Marketing.